1. EXT 504
Joanna Wiebe
(Summary of Paper on Porter)
Low Cost Leadership (Porter)

2. The critical focus in successfully implementing a cost-
leadership strategy is on efficiency and cost reduction.
3. Overview
Cost-leadership strategies are all about standardized products (no differentiation) with cost/price as the key differentiator.
Understand cost-reduction strategies (e.g., building efficient-scale facilities) and emphasize maintaining constant efforts (or, as Porter would say, activities) to keep costs low in order to create value for customers
Companies following cost leadership strategies cannot completely ignore sources of differentiation that customers value when producing standardised products.These include styling, minimal levels of service, and product quality (Porter)
4. Negatives of Low-Cost Leadership Strategy
Risks with cost-leadership strategy:
Tech innovations by competitors eliminate low-cost advantage
Too much focus on process efficiency = less awareness on environment & shifting customer preferences
Competitor imitation of low-cost + better value in other areas
When competitors imitate (successfully), low-cost strategy must shift to increase value to customers
Customer resistance to corresponding price increases
5. What Types of Companies Might Choose a Cost-Leadership Strategy?

Offer relatively standardized products

6. Have a minimum level of differentiation 7. Have a customer base that is price-sensitive 8. Have a willingness to lower their costs versus their competitors